Equity versus Equality

How should economic output be distributed among those who created it? An expansive theoretical and empirical literature seeks to answer this fundamental, and controversial, question, which has implications, inter alia, for the structure of wages, redistributive policies and international agreements. Among the possible fairness rules that have been proposed, the primary rivals are equality and equity, whereby the latter refers to allocating in proportion to some measure of individual contributions. This paper reports the results of an experiment conducted in the United States and Japan. It investigates a large variety of factors that might affect preferences for equity and equality, including multiple approaches to examining concepts of culture. We find impersonal third parties, or spectators, exclusively favour equity. Distributive preferences move incrementally toward equality, however, when subjects share personal stakes (i.e., are stakeholders), and even further toward equality, when stakeholder anonymity is lifted. Although the degree of self-interest sometimes differs across countries, these findings about fairness preferences are robust with respect to a wide range of non-ethics variables that seldom matter, including race, income, gender, nationality and culture. We interpret the findings as suggesting that equity is an impersonal (or impartial) rule of fairness, whereas fairness preferences move progressively toward equality with greater proximity, i.e., as relationships become more personal through belonging to a group and being non-anonymous.